3.1 Description of the Basque region

The Basque Country is an autonomous community of northern Spain. It includes provinces of Álava, Biscay and Gipuzkoa. In a comparative perspective Guipuzcoa remains one of the most industrial provinces of Spain. According to the provincial Chamber of Commerce, industrial activity and its associated services represent yet nearly 50% of Guipuzcoa’s gross domestic product, a figure would be well above that for Spain and most European countries.

The industry of Guipuzcoa was developed in the 19th century using the comparative advantages represented by the iron and steel available from neighbouring Biscay, a favourable geographic geography close to the French border, a skilled working class, and the availability of the San Sebastian – Pasajes harbour, which greatly facilitates exports of manufactured goods by sea. The industry structure is very similar to that of the Czech Republic as it is based on medium-sized metallurgic manufacturing enterprises with focus on sectors such as small arms and light weapons, home appliances, railroad and tramway locomotives and carriages, steel and machine tools, components for the important Spanish auto industry, autobus body manufacturing, and so on.

The decade 1995-2005 includes the years of the Spanish construction and real estate bubble. In the Basque Country this bubble also existed but by comparison to other Spanish regions (notably Madrid and the Mediterranean coast) was kept within reasonable boundaries. Among the reasons that explain this are: a) the already mentioned comparatively more diversified economy, in which the industrial sector and its related services still keep an important weight, b) the comparatively smaller pressures of the tourist residential sector, and c) last but not least, the much more responsible behaviour of both urban development authorities and managers of public regional financial institutions, the Cajas de Ahorros, which in the Basque country continue to control an important share of the banking and financial services sector.

Being thus comparatively less exposed to the real estate bubble, the Basque Country has been also less hit by the high unemployment rates that have haunted most Spanish regions during the Great Recession of 2009-2013. Actually, registered unemployment figures were high in the Basque Country from the time of the Transition (1976-1980) until about 1995. This was a consequence of the major transformation that the Basque industry had then to go through in the context of Spain’s accession to the European Union. The unemployment rates reached over 20% in 1986, a figure that was similar to that which then existed for Spain as a whole. According to the Eustat, the Basque statistical office, they were still at the level of 20.3% in 1997 (while the corresponding Spanish figure was then 20.7%). The employment figures for 2000 and 2005 showed, however, a major improvement. The unemployment rate for Basque Country fell from 20.3% in 1997 to 8.1% in 2001 (10.6% for Spain) and then to 4.9% in 2005 (9.2% in Spain). The latter figure already reflects the effects of the real estate boom of 2000 -2008 which had a temporary positive impact all over Spain. However, the figure for the whole Basque Country jumped from 4.1% in 2006 (Spain 8.5%) to 10.8% at the end of 2011 (Spain 21.4%) and to 15% in the first half of 2014 (Spain 24.5%). Thus, the unemployment rate in the region significantly increased during the period 2008-2013– five times the figure of 3.3% recorded in 2007.

According to Eurostat, the Statistical Office of the European Union, the average GDP per capita of the EU-27 countries in 2010 could be rounded up to Euro 24,500 (expressed in Purchasing Power Standards, PPS). If this value is used as the reference (100%) then the relative GDP per capita of the Basque country is 132%. It is the highest for any Spanish region, followed by Madrid, with 129%. The least economically developed Spanish regions of Extremadura and Andalusia have respective values of 67 and 73% of the EU average.

The relative GDP value for Spain as a whole is 99%. The per capita GDP of the Basque Country (expressed in PPS) has been since 2008 consistently higher than the Spanish average by about 30-35%. And the tendency during the current Great Recession (2009-2013) has been for this difference to increase.

The economic development and prosperity of the Basque Country, as measured in terms of GDP per capita is comparable or above that of many Western European countries.   Among the economically developed countries of Western and Northern Europe, Eurostat provides the following figures of relative GDP per capita for 2010: Netherlands (131%), Ireland (129%), Denmark (128%), Sweden (124%), Germany (119%), Belgium (119%), United Kingdom (111%), France (108%) and Italy (101%). Even European regions like Bavaria in Germany or Lombardy in Italy, which count among the most prosperous European regions, have per capita GDP values similar to the figure for the Basque Country. In the case of Bavaria, 135%, and in the case of Lombardy 132%, exactly the same as the value for the Basque Country.[1]

During the 1980’s Basque industry was in need of a major technological transformation to adapt to the single market of the European Union and to a global economy. In fact, unemployment rates in the Basque Country, especially in Biscay, soared in the late 1970’s and early 1980’s above Spanish averages, largely due to lack of competitiveness of many industrial firms and the labour redundancies created by that transformation.

Today the needs for unskilled and semi-skilled labour force in the Basque Country come primarily not from the steel industry but from the service sector. Contrary to what happened during the 20th century, they are being met not by internal immigration within Spain, but by foreign immigration, especially from Latin America and, to a lesser extent, from the Maghreb.

The population of foreign immigrants was quite small at the time of the Transition and it has been steadily increasing since then. In 2011, it did not reach yet 10% of the total population.

[1]              Nationalism, political violence, and the democratic polity: The case of San Sebastian in the Basque Country by Ramiro Cibrian, 2014

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